Why Price's monstrous contract could be worth the risk for Red Sox

On Tuesday, the Red Sox made David Price the highest-paid pitcher in baseball history. Dave Dombrowski is clearly a Price fan, having previously traded for him while running the Tigers, and he made good on his stated desire to bring a No. 1 starter to Boston.

Of course, at $217 million over seven years, Price certainly isn't coming cheaply and throwing money at free agents certainly didn't solve the Red Sox's problems a year ago, so it's fair to be somewhat skeptical of this kind of team-building approach. But, rather than simply paint with broad strokes, it's instructive to look at how pitchers who have performed similarly to Price have fared during the same stretch of their careers for which the Red Sox just signed Price. 

To identify a list of similar pitchers, I used the FanGraphs leaderboard to identify pitchers in the past 20 years who had compiled between +26 and +34 WAR in their age-24 through age-29 seasons; this gives us a group that approximates the +30 WAR that Price put up during his six years as a full-time starter. Nineteen pitchers have accomplished this feat, Price included, though a couple of them -- Felix Hernandez and Clayton Kershaw -- are present-day peers, and thus, don't have anything to tell us about how pitchers like this perform in their early 30s. So, excluding those two, we're left with 16 pitchers who were comparably dominant during their 24-to-29 seasons. 

How'd they do from ages 30 through 36? Well, take a look. 

David Price Comparisons

At the top, we see four very obvious success stories, with Mike Mussina, Roy Halladay, Andy Pettitte and John Smoltz all maintaining their dominance, putting up performances as good or better than they did early in their careers. This is the kind of performance the Red Sox are clearly hoping for, and if Price pitches like any of these four, this will go down as maybe the most successful free-agent pitcher contract in baseball history. These four represent the best-case scenario, and show that, yes, it is possible for a pitcher to maintain greatness even after turning 30. 

Of course, with just four of 16 names in that group considered success stories, it also shows that this isn't the outcome the Red Sox should expect. Even if Zack Greinke joins this group -- he's off to a great start, with +10 WAR in his first two years after turning 30 -- you'd still be looking at only 31% of Price's comparables holding up as durable aces. It's a high enough proportion to show the upside, but a low enough number to also show the risk. 

With six members of the next group -- ranging from Javier Vazquez to Justin Verlander -- the good-but-not-great tier is slightly larger. It includes a half-dozen pitchers who still provided value to their teams, but weren't quite what they were earlier. A fade from greatness, in the style of CC Sabathia or Verlander, would be tough to watch, but if Price gives the Red Sox a few more ace-like seasons in the short-term, at least they'll have positive memories to hang onto while regretting the back-half of the contract. 

And then you have the five guys who just broke down. John Santana was good for a couple of years before his arm gave out. Jack McDowell had one final healthy season at age-30, then barely pitched again. Jose Rijo had half a good season. Ben Sheets had two mediocre half seasons, while Brandon Webb managed just half of one game. These are the disaster scenarios, the kind of outcome that could sink the Red Sox for years to come. These are the risks that any pitcher brings to the table; at any time, a pitcher's career could be over. Every pitch could be his last. 

If we extrapolate a few more good seasons for Greinke, putting him in the top tier, that basically leaves us with recent Price-like pitchers giving us a 1-in-3 shot at each outcome. That would mean 67% of the time, the Red Sox would probably regret this signing, which is likely why no other team was reportedly willing to cross the $200 million barrier for Price. History suggests that this deal is more likely to fail than succeed. And that's where a lot of people stop their analysis, but it's not so simple as to tell someone to bet only on expected winners. In baseball, that's essentially an impossible task. 

Baseball is a game of failures. While the old canard about even the best players making outs seven out of 10 times is wrong -- there are very few great players with .300 on-base percentages -- it is true that even the best hitters on the planet are most likely to make an out every time they step up to the plate. But from a broader perspective, almost every type of player has a high probability of flameout over the next seven years, and instead of simply focusing on the breakeven point, decisions are better made when the value of all the possible outcomes is aggregated. In many cases, it's entirely the right decision to bet on a likely loser, as long as the reward is high enough in the cases where the play works out to justify a lesser cost in the more frequent scenarios where the play fails. 

To put the concept in basic terms, if I told you I'd sell you a raffle ticket with a 10% chance of winning, and the prize was $100, you should rationally buy as many tickets as I'll allow you to purchase for $9.99 or less. Every single one of them is a likely loser, but the one in 10 that pays out will more than make up for the other nine failures. In poker, this strategy is referred to as expected value, and professionals often bet into hands they know they're likely to lose simply because they know that their unlikely wins will make all the expected losses worth it in the end. 

Now, big bets on free-agent pitchers aren't usually positive value plays, and I wouldn't suggest any team should make a habit out of signing arms to $200 million contracts on the expectation that the upside will outweigh the downside most of the time. But if we're going to look at deals like this from a realistic perspective, we have to factor in the value of the times these contracts work, not just the probability that those outcomes will occur. And to a Red Sox team that is coming off consecutive miserable seasons, the potential reward for a quick rebound is enormous. The organization can undo a lot of the damage the past few seasons has done to its fan base -- and future revenue streams -- by righting the ship quickly. 

An ace-like 2016 season from Price, in which the Red Sox return to playing in October, might actually be worth something like $50 million to the franchise. Price doesn't have to be an ace to justify his $31 million salary; $31 million factors in the risk his arm blows up and he doesn't provide any value at all. By the end of this deal, Price will almost certainly be overpaid -- or he might not be pitching for the Red Sox, if the first few years go well and he exercises his opt-out to get another monster contract -- but the potential reward of having Price lead the team to the postseason could justify most of the cost of the deal in the first few seasons. Giving him the opt-out limits the team's upside, since there's no real scenario where it has a peak Price pitching at below-market rates in 2019 and beyond, but there is still upside in having a frontline pitcher help bring the franchise back to respectability without an extended rebuilding project. 

Unquestionably, it's a risk. Most likely, the Red Sox will regret this signing. But those two facts don't make this contract -- or any free-agent contract -- a mistake. When looking at free-agent contracts, don't just look at the probability of success or failure; look at the expected value of all the outcomes, and factor those into the discussion of whether a risk is worth taking. Every decision comes with risk; the question is simply how much risk is worth tolerating to get a given return.